United States Court of Appeals Tenth Circuit
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2d 96
CONTINENTAL OIL COMPANY, the Atlantic Refining
Company, Tidewater Oil Company and Cities Service Oil
Company, Petitioners,
v.
FEDERAL POWER COMMISSION, Respondent,
Long Island Lighting Company and Public Service Commission
of the State of New York, Intervenors.
No. 8117.
United States Court of Appeals Tenth Circuit.
February 10, 1967.
Rehearing Denied March 20, 1967.
Bernard A. Foster, Jr., Washington, D. C. (Bruce R. Merrill, Joseph C.
Johnson and Thomas H. Burton, Jr., Houston, Tex., for Continental Oil
Co.; Stuart J. Scott, Dallas, Tex., and Ross, Marsh & Foster, Washington,
D. C., for Atlantic Refining Co.; Clyde E. Willbern, Houston, Tex., for
Tidewater Oil Co.; and Cecil C. Cammack and R. J. Leithead,
Bartlesville, Okl., for Cities Service Oil Co.; on the brief), for petitioners.
Howard E. Wahrenbrock, Washington, D. C. (Richard A. Solomon,
General Counsel, Cyril S. Wofsy and Joel Yohalem, Washington, D. C.,
on the brief), for respondent.
Before LEWIS, BREITENSTEIN and HILL, Circuit Judges.
DAVID T. LEWIS, Circuit Judge.
This case reaches us after transfer from the District of Columbia Circuit1 as one
of many seeking review of orders of the Federal Power Commission entered in
the matter of Union Texas Petroleum et al., Opinions Nos. 436 and 436-A, 32
F.P.C. 254 and 32 F.P.C. 952. These cases, consolidated for hearing in this
court under the style of Pan American Petroleum Co. et al. v. FPC, seek to test
the validity of the subject orders as the culmination of the Union Texas
proceedings wherein the Commission determined an in-line price for
permanent certificates of public convenience and necessity for jurisdictional
natural gas produced and sold in the South Louisiana area. The instant case
consists of joint and several petitions by the CATCO group of independent
producers and presents additional issues peculiar to these petitioners and not
dependent upon the validity or non-validity of the rate-making aspects of the
Commission's orders. Petitioners contend that they were improperly included in
the Union Texas proceedings.
2
The sales of gas here involved are made to Tennessee Gas Transmission
Company from petitioners' interest in "Block 47-48," a part of East Cameron
Area, offshore Louisiana. Temporary authorization for such sales was granted
by the Commission in 1961 at an initial price of 21.4 per Mcf, the contract
price. Other sales made by petitioners from the East Cameron Area were the
subject of the Supreme Court's consideration in CATCO, Atlantic Refining Co.
v. Public Service Comm'n of N. Y., 360 U.S. 378, 79 S.Ct. 1246, 3 L.Ed.2d
1312. In proceedings subsequent to the remand in CATCO, the Commission
entered its Opinion No. 351, 27 F.P.C. 96, certificating such other sales at 18.5
per Mcf. As an aftermath of CATCO and the issuance of Opinion No. 351,
petitioners and four gas distribution companies sought to settle their rate
difficulties on all offshore sales made to Tennessee including those sales not the
subject of Opinion No. 351. "Block 47-48" sales were thus included in a
settlement agreement which was submitted to the Commission in September
1962 and approved by the Commission in its "Order Conditionally Approving
Rate Settlement Proposal, Severing and Terminating Proceedings" issued
December 21, 1962, 28 F.P.C. 1090. It is the effect of this order of approval
that premises petitioners' contentions that they were improperly included in the
Union Texas proceedings. Provisions of the settlement agreement pertinent to
our inquiry are:
D. Blocks 47 and 48:
1. Price:
Commencing September 1, 1962, and continuing through the moratorium
period ending July 1, 1967, the total rate charged shall be 19.5 cents per Mcf.
Subject to the provisions of Section IV below, no rate change shall be filed by
Petitioners prior to July 1, 1967.
2. Refunds:
Each Petitioner shall refund to Tennessee, with seven (7) percent interest, a sum
equal to two-thirds (2/3) of the difference between the price charged to and
collected from Tennessee and 19.5 cents per Mcf, from the date of initial
deliveries to August 31, 1962, both inclusive. No interest shall accrue after
August 31, 1962.
3. Modification of Temporary Authority:
5
The price condition in each temporary authorization heretofore issued to each
Petitioner shall be amended to read as follows:
"The initial price for such service shall be 19.5 cents per Mcf at 15.025 psia;
provided, however, that such price shall be changed to agree prospectively with
whatever initial service price is determined by the Commission in an order
which becomes final and no longer subject to judicial review in Docket Nos.
AR61-2, et al., or other similar proceeding; and provided, further, that if such
price so determined is less than 19.5 cents per Mcf, Applicant shall not be
obligated to make refunds."
IV
7
It is the intention of this Settlement Proposal that the prices established herein
for the "moratorium" period shall be subject to upward or downward
adjustment during the "moratorium" period according to any specifically
applicable area rate or rates ultimately determined in the South Louisiana Area
Proceeding, Docket Nos. AR61-2, et al., or other proceeding of a similar
nature, prospectively from the date of such determination. Therefore, it is
expressly provided as a part of this Settlement Proposal that:
(A) If the Commission, in Docket Nos. AR61-2, et al., or other proceeding of a
similar nature, issues an order which becomes final and no longer subject to
judicial review during the "moratorium" period, determining an applicable area
rate or rates lower than the settlement prices provided herein, each Petitioner
agrees to file for a prospective rate decrease to such applicable area rate or
rates.
(B) If the Commission, in Docket Nos. AR61-2, et al., or other proceeding of a
similar nature, issues an order which becomes final and no longer subject to
judicial review during the "moratorium" period, determining an applicable area
rate or rates higher than the settlement prices provided herein, each Petitioner
shall have the right to file for a prospective rate increase to such applicable area
rate or rates, provided that such increase is permitted by the terms of the
contract involved. (Emphasis supplied.)
10
At the time the settlement agreement was proposed and approved, "Block 4748" proceedings were consolidated in the South Louisiana Area Proceeding,
Docket Nos. AR61-2 et al., the latter then incorporating consideration of both
section 7 certificate proceedings and sections 4 and 5 rate proceedings.
Thereafter the Commission severed all certificate proceedings from the South
Louisiana Area docket and consolidated them in Union Texas. Petitioners duly
objected to the inclusion of "Block 47-48" in Union Texas, asserting then as
now that the order violated the settlement agreement.
11
All parties agree that the issue presented must be determined from an
interpretation of the language of the settlement agreement viewed against the
circumstances then existing including the mandates of the Natural Gas Act. The
order of the Commission denying petitioners' motions for severance from
Union Texas, 29 F.P.C. 730, succinctly and properly words the controlling
issue thus:
12
"The intention of the parties to the settlement, as approved by the Commission,
must depend upon the language used in the settlement agreement. The terms of
the agreement must be interpreted as reasonable men would normally
understand them."
13
Divorced from the sophistication of supporting argument, petitioners'
contention is a simple one. The settlement agreement provides, so state
petitioners, that "Block 47-48" issues are to be determined in the South
Louisiana Area Proceeding or in "other proceedings of a similar nature." The
Union Texas proceeding was not one "of similar nature" with the South
Louisiana Area Proceeding. The order of transfer thus violated the terms of the
settlement agreement. Two Commissioners agreed.2
14
The position of the Commission cannot be divorced from its sophisticated
reasoning. Conceding that the South Louisiana Area and Union Texas
proceedings are such as to contain many differences,3 the Commission
contends in effect that despite such differences the phrase "similar nature" was
intended by the parties to include any proceedings appropriate to determine a
certificated price under the provisions of the Natural Gas Act.4 In support of
this contention emphasis is placed upon the fact that the settlement agreement
does not refer to or specifically change the language contained in petitioners'
original temporary authorities which stated:
15
"The above specified rate [21.4 Mcf] shall remain in effect until changed by
Commission order in this proceeding, Docket No. CI62-147 [Continental's
original docket number]."
16
And the Commission then concluded as reflected in the majority opinion
accompanying the order denying petitioners' motions for severance from Union
Texas, 29 F.P.C. 730:
17
"The interpretation we must give the Movants [producers] position would lead
to the conclusion that the parties intended that the temporary authorization have
the same effect as a permanent certificate. If this were so, no advantage would
be obtained by the careful use of the language employed in the revision of the
temporary authorization. If the same result was intended there was no need for
the parties to carefully state otherwise. We must conclude that a different result
was intended and that when the parties stated that the initial price is to remain
in effect until the initial service price is determined in Docket No. AR61-2, et
al., or other similar proceeding, they intended that the initial service should
remain in effect until a permanent certificate was issued in the specific
certificate proceeding for which their application was docketed." (Emphasis by
the Commission.)
18
We think that the reasoning of the Commission violates both the simple
wording of the settlement agreement and the underlying purpose of the
agreement. The legal fact remains undisputed that Union Texas was not a
proceeding similar in nature to South Louisiana. Nor are the attempts of the
Commission to avoid that fact convincing in logic or law. The language
contained in petitioners' temporary authorities is simply "boilerplate" intended
to prevent a certificate holder from filing for a change of rate during the life of
a temporary certificate. This routine provision was encompassed within the
enlarged terms of the settlement agreement and the original reference to
Continental's docket number cannot be given totally unreal significance. And
finally, nothing in the Natural Gas Act requires that a temporary certificate be
superseded by a permanent certificate prior to the determination of the just and
reasonable rate under sections 4 and 5.5
19
This court has long recognized the right of the Commission to set the scope of
its proceedings and to utilize its administrative tools within the broadest of
discretions, subject only to a prohibition against the denial of a specific right.
Colorado Interstate Gas Co. v. F. P. C., 10 Cir., 370 F.2d 777, and cases cited.
But settlement agreements are encouraged for the very purpose of setting
rights, providing for stability in the exercise of those rights, and, unless such
agreements run afoul of the Natural Gas Act or the public good, should be
interpreted to accomplish the clear and stated purpose contained therein. Such
an agreement "should stand for what it says." Texas Eastern Transmission
Corp. v. F. P. C., 5 Cir., 306 F.2d 345, 348.
20
Petitioners should not have been included in the Union Texas proceedings.
Accordingly, the case is remanded for further hearings in proceedings
complying with the provisions of the settlement agreement or otherwise agreed
to by the parties.
Notes:
1
Jurisdiction is based on 19(b) of the Natural Gas Act, 15 U.S.C. 717r(b),
and 18 U.S.C. 2112
"Commissioners O'Connor and Woodward dissent on the grounds that the order
is inconsistent with the intent of the Settlement Agreement entered into by the
parties and approved by the Commission, in that the proceeding here involved
is not `similar' to AR61-2 in the sense that the term was used."
Brief for Respondent, p. 26. The concession was necessary. Union Texas was a
7 proceeding probing "public convenience and necessity"; South Louisiana
included consideration of 4 and 5 for determination of "just and reasonable
price." The evidentiary scope of the two types of proceedings is different. Cf.
United Gas Improvement Co. v. Callery Properties, Inc., 382 U.S. 223, 86 S.Ct.
360, 15 L.Ed.2d 284
Only one of the eight draftsmen agrees and that one has a clear economic
benefit. It has intervened in the case, but has filed no brief
Several certificate applications were consolidated in the Permian Basin Area
Rate Proceeding where the Commission held:
"This proceeding, instituted under Section 5(a) of the Natural Gas Act, will
determine the just and reasonable rates to be hereafter observed and in force for
all jurisdictional sales being made under respondents' rate schedules. Such rates
will apply as ceilings to all sales of respondents whether they were being made
at the time we instituted this proceeding or were begun subsequent thereto."
Opinion No. 468, mimeo ed. p. 127, 34 F.P.C. ___, ___. See Skelly Oil Co. v.
F.P.C., 10 Cir., 375 F.2d 6.
The certificate applications were disposed of in a separate order which stated
simply:
"As we stated in Opinion No. 468, the just and reasonable area rate fixed
therein constitutes the `in line' price required by the public convenience and
necessity in granting permanent certificates." Order Issuing Certificates, issued
August 5, 1965, 34 F.P.C. ___, ___.
